Keep your head in 'the clouds'

Publish Date:

Nov 1, 2010

By Todd Shafer

What is DustyMoto? A particularly harsh desert race? A porn star from the ‘70s with a predilection for motorcycle apparel? Actually, DustyMoto (www.dustymoto.com) is one of the industry’s most innovative companies and one you should be working with.

DustyMoto is an online service that creates a virtual warehouse in “the cloud,” housing old inventory from participating dealers. When stores in the network have demand for a part they don’t have, rather than order it from the OEM, they order it through DustyMoto, and the part is shipped from one of the other dealers in the network that has it in excess or obsolete inventory.

Let me explain what all that means. First, a virtual warehouse in the cloud means that all the products that DustyMoto shows as available in its system are not really sitting in a warehouse somewhere (if they were, it would be pretty big; DustyMoto’s CEO Bobby Franklin told me that it has about $45 million in inventory). All the inventory is being held at participating dealerships across the country. The cloud describes the Internet application space for data storage and processing not housed on any one machine. It’s physically spread all over the place, but the application or database appears as one unified entity (Google’s App Engine or Amazon’s S3 for example).

The inventory is typically stuff that’s at least nine months old. According to DustyMoto, studies show that if a part is on your shelf with no sales activity for nine months, odds are good that it will be there for a birthday or two before you finally pitch it or it ends up on eBay for pennies on the dollar.

DustyMoto makes its money from a seller fee of 15 percent. Considering that most shops eventually blow out old inventory at levels much steeper than 15 percent, and typically after incurring carrying costs that add up to way more than that over a year or two, the fee seems reasonable.

Another nice aspect for sellers is that parts are sold at current dealer cost (the same cost in your price files). A retailer, for example, may have paid $100 for a part a year ago, but if the OEM now sells it for $125, DustyMoto transacts it for that amount. The dealer just made $25, or at least recouped that much.

This is the type of brilliant idea I’ve called for in several columns, although, in my naivete, I had thought it would come from one of the distributors or OEMs. Franklin set my thinking straight on that one. He explained that the OEMs and distributors have zero interest in making the supply chain or inventory management efficient across the industry. In fact, it’s in their best interest to stuff inventory into the channel with the ferocity of a farmer cramming feed into a goose for foie gras.

When I noted to Franklin over the phone that inventory carrying costs were one of the largest contributors to dealers having hard times, and that it would be in the OEMs’ interest to do what they could to make their dealers more healthy, I could sense him rolling his eyes as he explained that if a dealer dies off, it’s an opportunity for the OEM to shove inventory into the empty parts department of the dealership that steps in to take the dead one’s place. My, what a healthy industry we have.

With those market dynamics in place, dealers must use all the tools available to make themselves as self-sufficient and profitable as possible. Think of DustyMoto as a co-op that allows all the dealers in the country to work together to make the entire industry more efficient, effective and healthy. Think about it. How much of your old inventory is someone, somewhere, ordering brand-new from the OEM? How many times do you order a part for an older bike that you just know has been sitting on some poor sucker’s shelf two states over for the last three years? DustyMoto is in place to solve these problems.

DustyMoto should be integrated with every major DMS. When you add a part to an invoice and it’s not in stock, your DMS should query DustyMoto’s servers first, before that special order goes to the OEM or distributor. It should be seamless. If DustyMoto hasn’t already begun working on an integration with folks like Ziios, they’re missing the boat. If DustyMoto and Ziios offer that capability, then ADP Lightspeed better get on board as well. If DustyMoto plays its cards right, it will radically transform a major aspect of our business, benefitting everyone at the retail level. And like all networks, the more nodes, or participants, the better it will work.

I think that DustyMoto needs to implement a type of credit system that rewards buying from the network. Sure, everyone wants to unload their old stuff, but there needs to be an incentive system that helps retrain parts managers so they just don’t order from the OEM or distributor first without checking DustyMoto’s system (again, integration into the DMS will help alleviate this). Maybe a system in which the more you buy from the network, the lower commission rate you have to pay when you need to unload your own old stuff?